The techniques of managerial accounting basically provide a company the process to earn more profits by using a comparatively lower operating system. This evaluation of management strategy helps the leaders of the organization to run their company more effectively. This process of managerial management works through a certain framework which involved analysis of the breakeven point of the organization, estimating the expenses of the company, analyzing the capital resource of the company and so on.
In order to discuss the managerial accounting for Wesfarmers, it can be said that the BSC (Balanced Scorecard), plays a vital role in it. The basic focal point of this training is to develop a suitable management structure to grow up the performance of the organizations towards their clients. In the working process of BSC, there are some certain aspects as; the institute provides a properly balanced scorecard, management structure for developing organizational performances, prepare an effective strategy and proper way of execution of that plan. Apart from all these, the institute also provides a valid certificate to their clients after the training process. After the discussion of the role of the BSC for an organization, it can be said that the training process to develop the framework of an institute is very much needed, as the BSC helps the organizations to calculate the perceptions of their clients which helps the organization to develop their business process more smoothly.
Identifying the clients of the mentioned company, namely Wesfarmers, it can be said that the clients of the company play an important role to develop the company as a whole. According to Cooper et al. (2017, p. 993), managerial accounting is much needed to discuss the impacts of the clients of Wesfarmers, it can be said that the clients control the sudden burnouts of the employees within the company. It also controls the satisfactory level of the various clients and the stress of those clients to develop their performance within the company. In order to relate Wesfarmers Ltd, it can be said that the shareholders of the company also play a significant role in organizational development. According to Pantano et al. (2014, p. 345), the clients (shareholders) represent innovative ideas or processes before management bodies to develop the company structure throughout the year. These innovative processes actually help the leaders of the organization to maintain the basic needs of the employees. To identify the impact of the clients, the organization would focus on identifying their clients properly.
To handle the customers properly, an organization would focus on identifying their customers. In recent times, the customers become more informed about their required products. Thus the company would concentrate on giving more information to the shopkeepers. According to Moatti et al. (2015, p. 751), besides this, there is some confused type of customers, to handle those clients; the company would enlighten to employ more patient employers. Another important type of customers is just wanderers who come to kill the time of the shopkeepers. Apart from all these, there are some other classifications of customers as the bargainers, chatty and regular.
Impacts of the customers
The above-mentioned clients or customers have a strong impact on the organizational background. To support this view, it can be said that Wesfarmers would focus on more informed shopkeepers to influence the informed customers about their products. Apart from this, the company would employ some patient and presentable employees to encourage the confused customers to use their products. According to Ding et al. (2015, p. 13), along with all these, Wesfarmers would also employ some well behaved and sound knowledgeable representative to handle the regular customers of the company. With the help of all these implementations, Wesfarmers would develop their business structure.
In order to develop the organizational structure of Wesfarmers, the company would be more careful on their shareholders. According to Cheng et al. (2014, p. 133), the company would concentrate on the satisfaction of their shareholders. To do this, the organization would fulfill the requirements of their shareholders.
Impacts of the shareholders
The shareholders are the backbone of every company. In Wesfarmers also, there is no difference of it. The shareholders not only giving the monetary support to the company, but also some required innovative structural ideas to develop the productivity of the company.
In order to run an organization, the investors are playing a useful role. In this context, it can be said that the investors of Wesfarmers are also very important to develop the organization. Thus, the company would focus on the satisfaction of their investors. In order to do that, the company would develop their entire company structure and policies.
Impacts of the investors
The impact of investors is very prominent to develop the business of an organization. In order to extend the business of Wesfarmers, the company would like to employ suitable organizational structure by using BSC methods within the company. According to Ding et al. (2015, p. 21), the proper interior working structure also attracts more investors towards their company. Thus it can be said that the investors have an important role in the development of an organization.
Balance scorecard and features of it
Balance scorecard is one type of management system which helps a company to interpret the vision and make strategies into action. This process helps to provide feedback on internal business procedure and outcome of external to continue betterment of company’s performance and result. Traditional management procedure focuses on financial part of company. Balance scorecard center on company's strategies into metrics of performance in several perspectives, which are internal process, financial terms, learning, growth, and customers. These perspectives come up with relevant feedbacks. This feedback includes plan of strategies and how it is executing along with necessary adjustments.
Internal process viewpoint
Internal business procedure objective is to recognize the procedure which is critical to satisfying shareholders and customers. In this procedure, company concentrates their effort into excel.
In financial term process, it recognizes questions of shareholders and how they view the organization, financial goal which is desired by the shareholder’s viewpoint. This goal depends on organizational stage in their life cycle. In growth Stage Company’s goal is revenue the growth rate; in sustain stage, it is about profitability. In last stage goal of the company is decrease capital requirements and increasing cash flow.
Growth and learning
Growth and learning procedure includes question of how company will learn, exceed and innovate to achieve company’s objective. Majorly this procedure is employ related.
Customer perspective recognizes how the customers view the organization along with serving the customer to meet financial objective. Customer prefers the organization in terms of quality, time, cost and performance. Customer’s requirement falls into this category.
Balance scorecard procedure has different benefits. Those are as follows.
a) It helps to make communication strategy between the firm
b) Helps to translate strategy into measurement parameters
c) Align goal of individual with strategic objectives of firm
d) Implement feedback result in strategic planning procedure
As it is starting performance for system management, balanced scorecard uses to develop strategies of system which not only measures performance also communicates, describes and aligns strategies in company.
Features of balanced scorecard
Balance scorecard develops image of the organization in mind of internal stakeholder of an organization. It has effects on the company’s internal relationship. As mentioned by Coe and Letza (2014, p. 63), good balance card shows the capability of organizations by developing clear picture which includes target, objective and strategic map. These are linked together to reduce conflicts.
Balance scorecard also works as communication technique to convey strategies of the company to each member. As suggested by Cooper et al. (2017, p.999), this actually happens by smart translating strategy to develop acceptable targets. This procedure shows how managers and employees need to follow the direction to create grassroots development.
Major feature of balanced scorecard, it has ability to highlight suboptimal decision which has some potential. It can measure organizational performance.
Developed and well-designed balance scorecard recognizes measured number of management which needs to monitor can be reduced. This frees the other management functions like staffing, planning, risk management, effect on human resource management and coordinating.
Balance scorecard needs to work operationally and functionally flexible. Major aim of balance scorecard is linking company’s strategy with company’s culture can be rigid to internal perspective.
Key features of BSC
a) Helps to log in securely for users with integration
b) Clear organizational objective and perspective to instruct functionality
c) Controls the administration through user interface
d) Collects data for organization
Australian Company Wesfarmers which belongs to retail industry follows this balanced scorecard to maintain security of the company by communicating with internal employees.
BSC is different from traditional performance measurement system
Traditional performance measurement
Traditional performance measurement procedure track downs financial performance of a company which is related to selling capital and profit earned. This process has focus on financial measurement on basis of internal accounts report like profitability, cash flow, revenue, and return on asset, earning per share and value-added on economic factor. These measurements are known as lag indicators. This lag indicator data reflects past data and historical performance of an organization. This quantitative performance metric improves and controls company's performance. This also can give result of wrong decision making for long term. Traditional performance is measurement system focus on financial metrics to motivate leaders for decision making which sacrifice long-term value benefit from short time performance. Cost reduction makes profit in short time of period, using loss quality, customer loss, expertise loss. This will have impact in long-term. As mentioned by Goswami (2015, p.139), when the companies mainly believe in mass production on basis of tangible assets such as equipment, plant, property.
For those cases, performance was based on historical data, which this system can produce. Now mass production is based on knowledge-based era rather than industrial era. This transformation has changed the whole process. Now the industry needs to rely on intangible assets like human capital, customer relationship, and intellectual capital. It has affected the system as managers do not want to see historic data manage current situation. But sometimes it also helps the manager to follow root cause of performance problem and initiate correction. Traditional performance measure dominantly focuses on financial performance is not applicable in this changing environment. Focuses is on financial measure only, because it is not possible for this system to capture entire performance of the organization. Company needs to link strategy to use the system. This system aligns short-term performance for long time goals.
Balanced scorecard system
Balance scorecard system recognizes weakness of traditional performance measurement system. As stated by Harden and Upton (2016, p. 83), this system has strategic non-financial performance metrics along with traditional financial metrics. This system provides balanced view of whole performance of an organization. It reflects the changes required in the organization in this environment. Intangible assets are major source of advantage. As mentioned by Trotman et al. (2015, p.1443), balanced scorecard is a strategic management system which includes business activity strategically by company’s strategic objectives with performance management. This procedure delivers in context to translate company’s strategy to particular strategy quantifiable performance which needs to be measured. Performance objectives are measured by several perspectives. Those perspectives are financial term, growth and learning perspective, internal business procedure and customer perspective.
Balance scorecard majorly describes organizational performance from the included perspectives. As referred by Keyes (2016, p.241), their performance metric has been collected, designed and analyzed by referring to each perspective. Balance scorecard mainly measures organizational performance giving balance between nonfinancial and financial measure. Balance score cards involve lead and lag indicator in those perspectives along with linking objectives of a company to track daily basis action. Balanced scorecard includes
Table5: Differences of TPMS and BSC
Company requires linking performance measurement in their strategy. Hence, it is important for organizational performance measurement system to need to link to functional unit, business unit, individual and group. Traditional performance measurement system is no longer applicable in this changing atmosphere, as it not reflects strategies of the organization, and also not recognizes capability and improvement of a company. As mentioned by Mütterlein (2016, p.233), a company need to link performance for future result and past performance.
Balance scorecard suitable for Wesfarmers client
As balance scorecard describes company's performance and measures that the company is achieving its goal, Australian organization Wesfarmers uses it for their organization to manage their clients. Shareholders are one of the clients of the Wesfarmers; they are mainly backbone of the company. Balance scorecard will help the shareholder to know strategic management system which includes business activity strategically by company’s strategic objectives with performance management. This procedure will translate company’s specific strategy along with quantifiable performance which needs to be measured by the shareholders. As Balance scorecard also works as communication technique to convey strategies of the company it will also help the shareholder to know the strategies of the company. It will help the stakeholder to make decision about Wesfarmers strategy.
As balanced scorecard also prefers intangible assets which include customers perspective and customers are major part of the Wesfarmers Company. Balance scorecard will help the company to communicate with their clients and get feedback from them. Balance scorecard will help the customer to deal with the company. This scorecard will focus on satisfaction of customer and will retain long-term growth of this organization. As commented by Sreelakshmi and Rao (2017, p.667), customer perspective about the company will help the company for strategic planning. The major goal of the Wesfarmers is to measure value which is delivered by customer by fulfilling customer’s needs and demand. Selected measurement of balanced scorecard includes rate of customer satisfaction, retention, delivery time, performance quality, market share, percentage of sale to potential customer of Wesfarmers.
Investor is another major client of Wesfarmers and balance scorecard has effects on the investors. It has helped the investor to see strategic management system which includes business activity strategically by company’s strategic objectives with performance management. As communication is another technique of balanced scorecard, this will convey strategies of the company to each member. As mentioned by Taticchi et al. (2015, p.6479), this actually happens by smart translating strategy to develop acceptable targets. This procedure shows how managers and employees affect the investor to follow the direction to create grass root development. In order to see Wesfarmers performance, investor can take help from balanced scorecard to measure their capabilities and improvement. Balance scorecard will help the investor to watch functional and operational activity. As balanced scorecard allows signifying management functions like staffing, planning, risk management, effect on human resource management and coordinating, investor will identify the related function before investing on Wesfarmers.
Wesfarmers Balancer scorecard has effect on several performances which includes economical contribution, environmental contribution. After adopting balanced scorecard has became country's largest company to recruit people in their company. They have increased their employee power by making strategic communication. In 2010 the company has 100,000 shares, of which 8% of issued capital. They have made strategies to communicate with customer, shareholder, investor and internal employees by developing balanced scorecard. They have improved their economic standard in 2010 by $1,565 million, which was less in previous year. Balance scorecard is helping Wesfarmers to make better strategic plan which includes building communication strategy. This is helping the leaders to think about relationship cause and effect to reach the goal. After improving the communication strategy, Wesfarmers is executing the plan internally and externally. Strategies help to engage employees in the system. This also helps the above-mentioned company to betterment of their initiatives. It also includes better information about the organization. The Wesfarmers are having quality management information along with best decision-making policies which have improved their performance. This BSC system helps Wesfarmers for their better align sector. They are focusing on the part to plan well. Wesfarmers has ensured that their support function and business unit work to achieve same goal. They are linking the strategy with operational activity. This BSC procedure is also helping Wesfarmers to make budget, analytic and risk management processes. This is helping them to be the strategy focused organization (wesfarmers.com.au, 2018).
In order to conclude the above study, it can be said that the managerial accounting has a deep and effective impact on an organization overall. The mentioned process helps the company to decide future strategies more smoothly, estimate the flow of cash, managing the various aspects of performance, identifying and analyzing the return rate of the company. In order to support this view, the impact of BSC can be named. After discussing the features of BSC, it can be evaluated that this management and training process helps an organization to develop the multi-number of features to increase the growth rate of the company. Estimating the customers' understandings about the products, evaluate some more internal business styles, learning from the faults of the company to grow up, these are the vital steps to develop the business structure of an industry through the BSC. In order to relate these with Wesfarmers, it can be evaluated that by using all these processes of managerial accounting, they influence the employees and manage their investors for future expansion of investment and satisfying the shareholders in order to develop the company as a whole.
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